Gold is attracting bargain hunters after a sharp pullback that has erased billions of value in bullion-backed ETFs.
Gold traders are the most bullish since before the bear market began two months ago, Bloomberg News reports.
Meanwhile, weekly sales of gold held in exchange traded products are poised for the second-lowest level since March after the value of holdings fell by about $45 billion this year, according to the story.
SPDR Gold Trust (NYSEARCA:GLD) was on track for a weekly loss after Friday's non-farm payrolls report.
Gold prices have declined 25% from the September 2011 peak and May 2013 bottom of $1,355, with a heavy sell-off in mid-April, which sent prices plunging 12% over five sessions, reports Trang Ho Investor's Business Daily.
Daryl Montgomery, author of four investing books, though, points to the massive drop after a downtrend marks a "classic bottoming pattern" that has cleared the markets of sellers.
However, Tom McClellan founder of the McClellan Market Report warns that retail investors are still shunning the precious metal.
"Investors are scared too far into their holes to want to get excited again, and that is the type of condition that leads to a long and persistent uptrend for gold prices," McClellan said in a note.
David Morgan, publisher of the Morgan Report, points out that gold mining stocks show some of the best valuations since late 2008, with GDX holdings trading around 11 times forward earnings.
"Institutional investors and hedge funds abandoned the gold sector over the last year because there was no apparent need for a hedge against inflation or financial accidents, but that can turn on a dime," Morgan said in a note. "In the meantime, gold miners have cleaned up their act (with) a renewed focus on profit margins and better use of and return of capital to shareholders."
Max Chen contributed to this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.